Imagine signing a five-year contract with a top-tier employee, only to realise mid-term that their role is redundant. You think, “No problem, we’ll just terminate early.” But what if your contract doesn’t explicitly allow that?
A recent South African court case, Sedumedi v Sefako Makgatho Health Sciences University, shows how that oversight can cost employers dearly — think R2.3m dearly.
The multimillion-rand misstep
In 2018, David Sedumedi signed a five-year deal with Sefako Makgatho Health Sciences University to serve as director of Institutional Advancement & Internationalisation, earning a hefty R129,647.17 monthly by 2021.
When the university restructured, Sedumedi’s role was split, and a new director of Internationalisation position was created. He argued he deserved the new role automatically; the university disagreed and advertised it. Sedumedi didn’t apply, and by February 2022, he was retrenched with a payout of R399,823.81 for notice, severance, and leave.
Sounds reasonable, right? Wrong. Sedumedi’s lawyers came knocking, claiming the university had no right to end his fixed-term contract early. He demanded R2.3m for the 18 months left on his deal. The court agreed, handing him a massive win and leaving the university with a costly lesson.
The legal trap employers must avoid
The court’s ruling hinged on a simple but critical point: fixed-term contracts are ironclad unless they explicitly allow early termination. The university tried to argue that its “Termination of Employment Policy,” referenced vaguely in Sedumedi’s appointment letter as “conditions of service,” gave it the right to end the contract with one month’s notice for operational reasons. The court wasn’t buying it.
Drawing on cases like Buthelezi v Municipal Demarcation Board and Natal Joint Municipal Pension Fund v Endumeni Municipality, the judge emphasised that contracts must be crystal clear. Vague references to policies don’t cut it. Sedumedi hadn’t explicitly agreed to the termination policy being part of his contract, so the university’s attempt to rely on it fell flat.
The result? The early termination was ruled a breach, and Sedumedi walked away with damages for the full unexpired term.
Andre van Heerden and Jacques van Wyk 18 Oct 2019 What this means for your business
This case is a wake-up call for employers. Fixed-term contracts aren’t just paperwork — they’re financial commitments. Here’s how to avoid a Sedumedi-sized disaster:
- Spell it out: Your contract must explicitly state the conditions under which it can be terminated early, whether for performance, restructuring, or other reasons. Ambiguity is your enemy.
- Get clear consent: If you want to tie company policies to a contract, ensure the employee explicitly agrees to them. A vague “conditions of service” clause won’t hold up in court.
- Don’t assume flexibility: Fixed-term contracts lock you in as much as they lock in the employee. If your business might need to pivot, build in clear exit ramps from the start.
The bottom line
Sedumedi’s victory shows that courts won’t bend over backward to rescue employers from poorly drafted contracts. The university’s oversight cost it millions, and it’s a stark reminder: clarity in contracts isn’t just good practice — it’s a financial firewall. Next time you’re drafting a fixed-term contract, don’t skimp on the details. Your bottom line will thank you.
